Question of the Day

Did illegal voters swing any congressional races?

In the absence of costumed protesters or rooftop banners, central bankers and top economists from around the world gathered for a low-profile meeting in Jackson Hole, Wyo., sponsored by the Federal Reserve Bank of Kansas City. This group, which Alice Rivlin, former vice chairman of the Federal Reserve, dubbed the "pro-globalization elite," strove to address this year's theme: the challenges and opportunities of global economic integration.

Fed Chairman Alan Greenspan, undoubtedly the star of the elite event, took it upon himself to remind his company just how prevalent those challenges have been and could continue to be. According to a Wall Street Journal article, just as World Trade Organization director-general Michael Moore was toasting the strides made in recent years to almost wipe out industrial tariffs, Mr. Greenspan said that these industries will increasingly try to advance legislation to favor their own interests and that "a very significant danger" exists that "Old Economy industries" will push for trade quotas.

As the International Monetary Fund's research director, Michael Mussa, was musing "I do not believe that the conditions are ripe for a return to isolationism," Mr. Greenspan piped in, noting that momentum for free trade initiatives has "clearly come to a remarkable stall." Indeed, President Clinton has been unable to win fast-track negotiating authority from Congress, which would limit lawmakers' ability to either approve or reject, but not tinker with, an already-negotiated trade pact. This has prevented Mr. Clinton from striking trade deals with Chile and other countries. In addition, WTO countries have had considerable difficulty kicking off a new round of trade liberalization talks.

But Mr. Greenspan did far more at the retreat than raise gloom. The Fed chief made a brilliantly cogent speech noting the virtues of free market forces. In Europe, noted Mr. Greenspan, policy makers have attempted to protect workers by making it costly and difficult to lay them off. "Parenthetically and counterintuitively, the increased ease of layoffs in the United States" has made the labor market more dynamic and contributed to record low-unemployment, said Mr. Greenspan.

Furthermore, since it is expensive and difficult for many European employers to lay off workers, they are much less inclined to invest in the type of technological innovation that has boomed in the United States, he added. This type of innovation makes industries more productive and less labor dependent, but if corporations can't cut their labor costs, there is a decreased incentive to invest in technology.

All the same, massive anti-globalization protests in Seattle and Washington have clearly had an impact. Mr. Greenspan and others noted the importance of addressing some of the concerns of the anti-globalization set. Douglas Irwin, an economist at Dartmouth College, said at the retreat that skepticism about globalization was closely linked to low job skills and educational levels, and that creating a better trained and educated work force could boost support for trade liberalization.

As economists have noted, globalization has changed the nature of demand for labor, making many types of skilled labor more sought after, but making unskilled labor more plentiful, and therefore less valuable, worldwide. This has affected wages for the unskilled in the United States and other countries.

But anti-globalization protesters should reevaluate the nature of their gripe. Rather than stop the forces of globalization, which has helped prolong unprecedented levels of simultaneous growth and unemployment, the private sector and policy makers ought to think about how to create a skilled work force to meet the ever-increasing demands of the technology-driven new economy.